Operating Budget Update—March 2016 Finance & Administration Lawrence R. Kelley Interim Senior Vice President for Finance & Administration Operating Budget Update—March 2016 9/19/2018

Trends ENROLLMENT 2010: 20,002 FTE STATE SUPPORT 2011: $6,978/FTE 15.8% decline, or ~ $28 million STATE SUPPORT 2011: $6,978/FTE 2015: $6,310/FTE 9.6% decline/FTE, or ~ $11.3 million DISCOUNTING 2010: $66.3 million 2015: $78.6 million $12.3 million--18.6% increase, or 40.6% increase/FTE 9/19/2018

Process Review current budget and compare to projected actual Address variances to determine if they are one-time or continuing Determine if action is necessary in current year Share current status Rebench the base for next fiscal year Develop assumptions that could provide a realistic and balanced budget Share the assumptions Inform the university 9/19/2018

Where we missed in fiscal 2016 Budget stress: Enrollment targets Revenue projections 18-hour plateau Investment returns Budget gap $16.1M, excluding ProMedica designated revenue 9/19/2018

Actions taken in fiscal 2016 Budget Relief: 8-month hold on filling vacant positions Consolidation of administration positions 1.5% stabilization to operating budgets Consolidation of colleges Remove allowance for unmet new revenue Utilities savings Academic affiliation agreement (designated) Carryforward reallocation 9/19/2018

Assumptions for fiscal 2017 The combined University operating budget is balanced based on projected current revenue and expenses There is a 1.5% base operating (excluding compensation budgets) budget stabilization reduction in FY16 There are budget reductions in FY16 equal to unrealized planned revenue in college budgets The affiliation agreement with ProMedica provides $40 million, $4.7 million of which is applied to help fund related operating budget costs in FY16 New revenue, $2.7 million from ProMedica, to fund fee waivers FY17 No Increase Tuition and General Fee-Undergraduate No Increase Tuition and General Fee-Graduate A reduction in estimated revenue for tuition and fees due to the full-year effect of the new 18-hour plateau State Support of Instruction to be the amount identified in the biennial budget No new revenue assumptions to offset the operating budget reductions in FY17 No increase in Operating Expenses or Revenues for UTMC/Clinical operations A 2% rate increase for resident halls in FY17 Undergraduate enrollment for FY17 is anticipated to be the same as it was in FY16 Graduate enrollment targets expect enrollment to at least hold at FY16 levels but we built the budget with a slight decline to be conservative Reduced debt service due to refunding of existing debt There is a 3% base operating budget (total departmental budgets, including compensation) stabilization reduction for FY17 Campus contingency will get some new resources from carryforward draw but still not be in recommended 5-10% of budget range Salary increases consistent with existing agreements There is an anticipated cost reduction in benefits based on health care cost containment and wellness initiatives Possible expense reductions related to scholarship privilege (this item is in process) 9/19/2018

…and how about 2017? Shortfall from 2016: $16.1M Add provision for inflationary adjustments Less 2017 Mitigations: 3% budget stabilization Residence Hall fee increase Investment earnings ProMedica fee-waiver support Refund existing bonds 9/19/2018

Next Steps Prepare fiscal 2017 budget based on assumptions for Board action Continue to gather ideas for expense reductions and revenue growth Continue to gather ideas for budget/performance incentives Share and evaluate ideas Determine which ideas might work beginning in fiscal 2017 Implement and monitor the performance of the ideas as well as the entire budget Consider mid-year allocations IF resources are available 9/19/2018

OPERATING BUDGET UPDATE Thank you! March 2016 9/19/2018